Folks,
Market Observations for the Week: A weak retail sales report led to early weakness in the SPX on Wednesday, but a strong presentation by Chairman Powell led the SPX back into the close. Our bias that a C-Wave down started on Monday and could continue down after the FOMC minutes could be falsified by early strength on Thursday. The 12/18-12/20 Full Moon Timing Window/Venus retrograde turn window could either bottom the C-Wave that started on Monday or put in a final divergent high in the SPX – how we trade Thursday will tell us. On Saturday, we saw an impressive alignment of Uranus, the Moon, Jupiter, Saturn, Neptune and Venus and this could signal that a major top is at hand. Chairman Powell has raised inflation to his number one priority and today he announced a doubling of the taper and guided the market to three rate hikes in 2022. We remain in 50% cash because of the macro factors facing the global economy (Chinese credit contraction, rising global inflation, and rising global rates, new Covid variant, etc.) and now a more aggressive Fed that wants to rein in inflation. Crude oil may still be rolling over and that is market bearish. After testing 45700 on Monday, Bitcoin responded to some supportive words from Powell on digital currencies and bounced to test 50000. Gold dropped to $1753 post-FOMC minutes but managed to climb back to $1784 Wednesday evening – a 20-day cycle low was made. The USD spiked to 96.9 after the Fed minutes but is pulling back sharply overnight.
12/15/21 (Commentary for Wednesday) A surprisingly small retail sales report gave the SPX a weak open Wednesday but the SPX responded strongly to the FOMC minutes and Powell’s smooth presentation gave the market a rally into the close. The stock market literally “sold the rumor but bought the news” today but the stock market action could be labelled just a “wave 2 of C down”. Our bias is that the 12/18-12/20 turn window could be a low, but it could also be a divergent high for the SPX. The SPX appears to be sub-dividing down in a C-Wave with a symmetry target below the 12/1 low at 4495 by the 12/18-12/20 turn window which could be the start of a X-mas rally. The big range days over the last two weeks in the NDX and SPX are indicative of a topping bull market – the “planetary alignment that clustered on both sides of the Moon” into Saturday argues that an important top was made on 12/10. Chairman Powell doubled the taper and put the market on notice for three rate hikes in 2022. Historically, when the Fed has drained liquidity from the financial markets via cuts in bond purchases, big moves down have started in the stock market since 2008. Bitcoin bounced into the close from supportive words for digital currencies by Powell – however, Bitcoin is still trading below 50000 Wednesday night – this is a bearish sign for the stock market. The trendlines from the Covid low on 3/23 turned back the last speculative highs in TSLA, Bitcoin, and the IWM near the 11/4 New Moon and continue to remain as stiff resistance. We still hold 50% cash as we feel that the macro risks of being 100% long are just too great with the global credit contraction led by China still progressing and a now more aggressive Fed targeting inflation. Another scary signal came from recent news that the down payments of 20% of first home buyers came from Bitcoin profits – the US economy is highly-levered to widespread speculation in stocks, stock options and digital currencies. Gold dropped hard to $1753 after the FOMC minutes but rallied back to $1784 overnight after a 20-day cycle low bottomed. Crude oil rolled over on Monday and still looks short-term bearish. Bonds made lows for the week after the FOMC minutes and the 10-yr rate bounced to 1.485%. In the US, the background monetary conditions have been deteriorating for months and the Fed quickened the reduction of financial liquidity from the US stock market at this week’s Fed meeting despite slowing global growth concerns. The USD spiked to 96.90 before pulling back overnight.
Big Picture on Stocks (UPDATED) – Friday, the SPX made a B-Wave test of the 11/22 high at 4740. On Monday, the SPX started a C-Wave down which continued to sub-divide down on Tuesday – we may see a symmetry correction which undercuts the 12/1 low at 4495 by 12/20. The Russell 2000 and the NYSE Composite have already given us an EW 5-wave decline on the daily charts into 12/1 which is a bear market signal.
Big Picture on PMs (UPDATED) – Gold dropped to $1753 after the Fed minutes and bottomed a 20-day cycle low – we could see a strong bounce above $1800 into late December.
- Stocks – Did the SPX bounce in just a Wave 2 of C correction or did we start a X-mas rally today? How we trade on Thursday will enlighten us.
- Gold – Gold dropped to $1753 and bottomed its 20-day cycle low – we’re looking for a strong bounce into late December.
- Silver – Silver double-bottomed at $21.41 before rallying above $22.20 overnight.
- Bonds – Bonds fell as the 10-yr rate bounced to 1.485%.
- Crude Oil – Crude oil appears to be rolling over and that is a weak sign for the SPX.
- Dollar Index –The USD spiked to 96.90 after the Fed minutes but rolled over into the evening.
TURNING POINT DAY
The turn windows for this week is 12/13 and 12/15.
Comments